Bloomberg News

Philippine Peso Rises to 12-Week High, Bonds Gain on Fed Rate

January 26, 2012

Jan. 26 (Bloomberg) -- The Philippine peso rose to a 12- week high and bonds gained on speculation investors will seek higher-yielding assets after the Federal Reserve predicted U.S. borrowing costs will stay near zero.

The Fed said yesterday it sees “exceptionally low” interest rates through 2014, having previously pledged to refrain from any tightening until at least the middle of 2013. Ten-year government notes yielded 335 basis points more than similar-maturity Treasuries, down from 354 basis points at the end of last year, according to data compiled by Bloomberg.

“We may see more inflows,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila. “Risk is back, so emerging markets will be OK. The Fed is doing something to protect the economy.”

The peso climbed 0.7 percent to 42.838 per dollar at the close in Manila and reached 42.815, the highest level since Nov. 3, according to Tullett Prebon Plc. The currency has advanced 2.4 percent this month.

Central bank Governor Amando Tetangco said the Fed’s move gives the Southeast Asian nation and other emerging-market economies “some policy breather to concentrate on improving domestic demand.”

“To the extent that the Fed action sustains the positive growth outlook in the U.S., this should also be positive for our own trade prospects,” Tetangco said in a mobile-phone message.

The yield on the 6.375 percent bonds due January 2022 fell three basis points, or 0.03 percentage point, to 5.23 percent, according to prices from Amstel Financial Services.

--With assistance from Clarissa Batino in Manila. Editors: Simon Harvey, Andrew Janes

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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